Welfare Reform and Work Bill

Baroness Hollis of Heigham Excerpts

Wednesday 9th December 2015 Lords Chamber

[The Lord Bishop of Durham]

My Lords, I will speak in support of Amendments 24, 25 and 26. I know that everyone in this House, and indeed in the other place, is committed to protecting those children in our society who are vulnerable to suffering the worst effects of poverty. Indeed, I know that there is a broad recognition across the House that some form of statutory reporting on the issues of child poverty and children’s life chances is an important tool in driving initiatives that will combat that poverty. The questions about what should be included in Clause 4 are questions of best practice, rather than questions of best intention.

I welcome the Government’s commitment to tackling the disadvantage that can arise from worklessness and poor educational attainment. It is certainly true that children growing up in long-term workless households are placed at a significant disadvantage to their peers when it comes to their future working lives, as are those who leave school with low educational attainment. A thorough reporting on these indicators should help drive initiatives to combat these two factors, which can be so detrimental to the life chances of children. I welcome the Government’s focus on these two priorities.

However, it is my belief—and the belief of the vast majority of organisations working in this area, as we have already heard—that measuring workless households and educational attainment alone is insufficient as a method of measuring a child’s life chances and exposure to poverty. There are, of course, all sorts of other factors that can influence the future prospects of children: problem debt, substance abuse, family breakdown and substandard housing. The list of life-chance indicators should be extended to include these. We also know that children’s life chances are shaped very early on in their lives, so we need to be looking at cognitive and social development at a younger age.

Most significantly, however, the current set of life-chance indicators completely fails to capture income poverty and material deprivation, particularly in relation to in-work poverty. I think that we have to keep on repeating this: some 64% of the children defined as living in poverty under the current measures are in working households. This should give us cause to stop and think about how effective these new measures will be when no assessment of in-work poverty is facilitated. It is particularly problematic given the well-established body of evidence demonstrating the strong link between material deprivation and the wider life chances of the child.

The Government talk confidently about focusing on the root causes of poverty rather than the symptoms, but I think that the reality is a little more chicken and egg than perhaps they would like to admit. Let us take as an example educational attainment. Does poor educational attainment make it more likely that children will experience poverty and deprivation in later life? Yes, of course it does, but income poverty and deprivation also make it far more likely that children will do less well at school, lacking the resources they require to compete with their peers on an even footing.

As it stands, Clause 4 is inadequate. In the right desire to move away from an overly simplistic definition of child poverty rooted in money alone to a broader-based, root-cause understanding, I fear that a tap-root cause is being lopped off, and that will make the other roots less stable. We all know that if you take out the tap-root, the danger is that the whole tree will fall. We must retain some assessment of income poverty, and particularly in-work poverty, in the life-chances measures. Given that at Second Reading the Minister, the noble Lord, Lord Freud, committed the Government to the continued publication of the HBAI measures that are currently enshrined within the Child Poverty Act 2010, it seems odd that the Government are so reluctant to include those measures on a statutory basis in this Bill, which would cost almost nothing. I and most organisations working in the area of child poverty would like to see this happen. At the very least, a report of in-work poverty that draws on those figures must be included within the reporting obligations, as has been suggested by the noble Baroness, Lady Lister. A failure to report on in-work poverty would be a real failure by a Government who have prided themselves on combating low pay and making work pay.

[Baroness Hollis of Heigham (Lab)]

My Lords, I am keen to follow up on the speech of the noble Baroness, Lady Stroud. She has asked the right questions, if I may say so, but I do not go with her on some of her responses. First, she criticised relative poverty as a measure for assessing income poverty and is therefore throwing it out and retaining only worklessness and the educational attainment of children at the age of 16 as her main drivers. She did not remind the Committee that relative poverty is one of four indicators that include persistent poverty, absolute poverty and material deprivation. She is right to say that relative poverty reflects what is happening to the broader economy, but you need the other considerations and measurements as well, which we have. Taken in the round, they—particularly persistent poverty—are an appropriate, proper and dynamic snapshot of what is happening to families. I think that she will recognise that.

Secondly, the noble Baroness asked exactly the right question, which is this: why is it that half of people in poverty come out of it the following year but the other half are stuck, and how do we get to those who are stuck? If we look at what the Government are proposing in this Bill, and have been proposing through the summer, we will see that the reasons people are going to be stuck in poverty and therefore move into persistent poverty are being made worse on almost every count. People in work and in poverty who have poor skills certainly need job progression; that is well established. However, the primary reason why people are in work and have low pay and therefore are in poverty is because their work is part-time, insecure, or based on zero-hour contracts where from one week to the next they do not know whether they will be working for 10 hours or 30 hours, or they have young children. Most of us would not wish to see lone parents being forced, against their judgment of what is best for their family, to leave a two or three year-old in professional childcare while they work on a supermarket till when they feel that they should be trying to balance their work and life responsibilities—rightly so in terms of working part-time, but also in terms of bringing up their children so that those children can respond to the fact that simultaneously they have a parent at work and a parent at home. It can be hard for children, so we should not make it harder. That is a debate which I do not doubt we shall return to.

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A number of noble Lords have mentioned the evidence review that we published in 2014. It makes it clear that worklessness and educational attainment are the factors that have the biggest impact on child poverty and children’s life chances. I will talk about work in a moment when I come to Amendments 24 and 26. A good education is the bedrock for future success in life. At the heart of our determination to improve children’s life chances and social mobility is a commitment that all children, regardless of background, are extended the educational opportunities that allow them to fulfil their potential. To pick up the query from the noble Baronesses, Lady Lister and Lady Blackstone, the evidence review found that the most important driver of poverty was worklessness.

[Baroness Hollis of Heigham]

And low earnings, my Lords. It says, in brackets, “low earnings”.

[Lord Freud]

It referred to “low earnings” out of worklessness; that is why the brackets are there.

[Baroness Hollis of Heigham]

My Lords, that is one reading of it. I am sorry to trouble the Committee with this but the review makes it clear that while worklessness with both parents out of work is obviously a primary driver, if only one parent is in work there is still a very substantial risk of in-work poverty, as has been explained time and again. That is why in the Government’s own research they are brigaded together.

[Lord Freud]

I will come to the point about the in-work and the workless in a little while. Let me go on.

Clause 4 will remove the existing measures and targets in the old Child Poverty Act and provide a statutory basis for much-needed reform to drive real change to improve children’s life chances and tackle the root causes. It introduces a new duty on the Secretary of State to report annually on children living in workless households and children’s educational attainment in England at the end of key stage 4. In response to the point made by the right reverend Prelate the Bishop of Durham about the other indicators, alongside these statutory measures we will develop a range of non-statutory indicators to measure progress against the other root causes of child poverty, which include but are not limited to family breakdown, addiction and problem debt. Anyone will be able to assess the Government’s progress here. The Government are saying, “Judge us on that progress”.

I turn to Amendments 24 and 26. With Amendment 24, the noble Baroness, Lady Lister, and the noble Lord, Lord Kirkwood, seek to expand the duty placed on the Secretary of State to publish and lay before Parliament a report containing data on children living in low-income families,

“where one or both parents are in work”.

I think I can add the name of the noble Baroness, Lady Hollis, to that amendment in practice. Amendment 26 would add “low income” and “in work” to the list of terms to be defined in the annual report.

It is important to pick up the point raised by a number of noble Lords, including the noble Baronesses, Lady Lister, Lady Blackstone and Lady Hollis, and the right reverend Prelate, about two-thirds of children in relative poverty being from working families. It is correct that the HBAI figures show that 64% of children in relative poverty are from a family where at least one adult is in work. But this situation has developed over the past couple of decades due to the improved progress in tackling poverty in workless families. In 1996-97, the earliest period for which data are available, around 2 million children in relative poverty—around 60% of them—were from workless families, and around 1.5 million, or 40%, were in working families. During the 2000s, progress was indeed made in reducing the number of children in poverty from workless families by focusing spending on income transfers. Unfortunately, this had the unintended consequence of weakening work incentives and has resulted in hardly any change in the number of children in poverty from working families, which stood at 1.4 million in 2009-10. In other words, it was down by only 100,000.

This illustrates why we are transforming the benefits system and introducing the combination of out-of-work and in-work benefits in universal credit: it is to get rid of the position where you do income transfers one way and undermine the incentives for people to work. I ask noble Lords to think about this issue carefully. With the income transfer process under the old policy, which was not in the Act before, we drove straight into this conundrum of where the incentives were to get people into work.

As for the evidence we have on work being the best route out of poverty, according to the latest statistics, the risk of a child from a working family being in relative poverty is 13%, which compares to the risk for a child from a workless family of 37%. It is clear that a child in a workless family is almost three times more likely to be in poverty than a child who lives in a family where at least one adult works, meaning that the risk of a child being poor is dramatically reduced if at least one parent works.

Furthermore, earlier this year we published analysis on the transition into and out of poverty. This showed that 74% of children who are in poor, workless families will leave poverty altogether if their parents move into full employment. It also made clear that the more work parents do, the more likely they are to leave poverty, with 75% of children from poor families that are partly employed leaving poverty if their parents enter full employment.

[Baroness Hollis of Heigham]

We are putting a lot of emphasis on full-time employment, but children in persistent or recurrent poverty will usually be the children of lone parents, who by definition, because they are bringing up children, have limits on the hours they can work. Another such group would be disabled people. It is the combination of low pay in work and limited hours that keeps them in poverty, although they are in work. To say they must go into full-time work when they have young children shows no understanding —if I may say this—of what it is like to be a single parent bringing up several children on your own.

[Lord Freud]

I can only provide the noble Baroness with these relative statistics on what is happening—where the risks for being in poverty are much higher when you are entirely workless. Clearly, as we look at our statistics for the workless, we will have quite a lot of analysis behind what is really happening there.

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[Baroness Hollis of Heigham]

Would the noble Lord agree that the Department for Work and Pensions has always understood that dilemma and therefore, particularly for disabled people, has sought to reduce the risk of going into work, in terms of both the claimant’s health and the viability of the job, by having extensive linking rules? The linking rule that if you cannot sustain a job, you can go back on to your previous level of benefit allowed a lot of disabled people, under the New Deal for Disabled People, to springboard into work.

[Lord Lansley]

The noble Baroness is drawing me into a debate that I was not intending to enter into. My point was not about whether having a structure in which those who are currently on ESA WRAG and then go into employment and come off it should lose the benefit after 2017. My point is that within the terms of the review, contrary to the argument that is being presented that there is no incentive effect of the level of benefits relative to work, people are arguing that that is not true and that there is a disincentive effect in going into work if the level of benefits is higher.

I shall conclude on that point. It seems to me that we need to be operating on each of these areas. As a Government and a country, we are doing well in providing opportunities for employment. If we do the right thing in terms of support, we can give people with disabilities greater access to those employment opportunities that are increasingly available and, most importantly, give people access to the support. The review gives very good material for the Government to continue the process of thinking towards what that structure of support should be to be of the greatest possible benefit for people with disabilities.